DealLawyers.com Blog

According to this McKinsey article, carveouts account for almost 30% of all M&A transactions. There are good reasons why carveouts are attractive to buyers and sellers, but they also present unique integration challenges because of the need for coordination between the parties. The article offers some advice on how to address the integration issues associated with carveouts. This excerpt discusses how the parties can create day-one readiness and prepare for post-closing integration:

– Determine prioritization. Unlike more straightforward integrations, buy-side carve-outs demand extra focus on identifying entanglements and day one separations and cut overs. In these situations, the final design of the organization and other complex initiatives may need to be temporarily deprioritized, depending on the team’s capacity.

– Run a joint day-one-readiness workshop. As a deal’s close approaches, it’s beneficial to run a day-one-readiness workshop with all parties. This group can focus on a detailed sequencing of activities that will take place before, during, and after the deal’s close. Exploring what-if scenarios in a cross-functional group setting is helpful to align responsibilities for each required step and ensure that all needs are covered and risks mitigated.

– Prepare for the unexpected. The complexity of a target’s simultaneous separation and integration may lead to unforeseen issues, regardless of preparation. Setting up a robust day one hypercare effort with rapid escalation processes can be critical to minimizing disruptions.

The article also provides recommendations on how to foster alignment between the buyer’s and seller’s integration teams and on scoping and providing resources for work streams.

– John Jenkins